Retail

Australia's Westpac-Melbourne Institute consumer sentiment index down

16 Jan '26

2 min read

Australia's Westpac-Melbourne Institute consumer sentiment index down

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Insights

Australian consumers entered the New Year in a downbeat mood, with the Westpac-Melbourne Institute consumer sentiment index slipping 1.7 per cent lower to 92.9 in January from 94.5 in December.
Near-term expectations for family finances and the economy recorded the sharpest deteriorations.
Consumer confidence around the near-term outlook for jobs also deteriorated slightly in January.

Australian consumers entered the New Year in a downbeat mood, with the Westpac-Melbourne Institute consumer sentiment index slipping 1.7 per cent lower to 92.9 in January from 94.5 in December last year, Matthew Hassan, Westpac’s head of Australian macro-forecasting, said.

“While confidence is still well above the extreme lows recorded during the protracted ‘cost of living’ crisis in 2022-2024, consumers are becoming more concerned about what 2026 may bring for family finances and the wider economy,” he said in a release from the Melbourne Institute of Applied Economic and Social Research.

“The main catalyst continues to be a sharp turn in interest rate expectations. Nearly two thirds of consumers with a view now expect mortgage rates to move higher over the next 12 months, more than double the share back in September,” he noted.

The January decline centred on expectations for the year ahead. Near-term expectations for family finances and the economy recorded the sharpest deteriorations in January, declining by 4.5 per cent and 6.5 per cent respectively.

This was partially offset by a small improvement in assessments of family finances versus a year ago (plus 2.3 per cent) and slight gains for the ‘economic outlook, next five years’ and ‘time to buy a major household item’ sub-indexes (plus 0.9 per cent and plus 0.2 per cent respectively).

With all sub-indices recording readings below 100, this is only the second time since October 2024 that pessimists have outnumbered optimists across every component, the release noted.

The mortgage rate expectations index, which tracks consumer expectations for variable mortgage rates over the next 12 months, rose by a further 5 per cent in January.

At 152.8, the index is now at its highest level since July 2024, when underlying inflation was still running at 4 per cent and the central bank was voicing concerns that it might not return to the 2-3 per cent target range.

Consumer confidence around the near-term outlook for jobs also deteriorated slightly in January. The unemployment expectations index increased by 2.1 per cent to 129.4. That brings the index very slightly above its long-run average, broadly consistent with a flat labour market in 2026.

Fibre2Fashion News Desk (DS)

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